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REGULATION/LEGISLATION

U.K. should increase retirement age faster, new report recommends

A faster increase in the state pension age, an end to guaranteed increases of pension benefits and a midlife check to help people take stock of their work, health and retirement have been recommended in a final report reviewing the U.K. state pension age.

The report, by the government’s independent reviewer John Cridland, was published Thursday, and recommends that the state pension age increase to 68 over a two-year period starting in 2037. That is a faster pace than the current planned increase to 68 over a two-year period starting in 2044.

The state pension age should not increase more than one year in any decade period, the report said, assuming there are “no exceptional changes to the data.” The current state pension age is 65, rising to 66 by 2020 and 67 by 2028.

The U.K.’s current guarantee to increase the state pension benefits every year by one of three factors — the higher of inflation, average earnings or a minimum of 2.5% — should be scrapped, the report said. The report said the withdrawal of this so-called triple lock would see state pension spending fall to 5.9% of gross domestic product by 2067 fiscal year, compared with the current projection of 6.7%.

A midlife check should be introduced as a trigger point to encourage people to take stock and make realistic choices about work, health and retirement, the report said.

In addition, the report addressed the upcoming automatic-enrollment review, taking place this year in the U.K. The report noted that self-employed people do not benefit from auto enrollment and said it is encouraging to see that the review will look into the situation.

Retirement coverage for women was also highlighted. The report suggested changes based on the Swiss model, which could see couples given the option to combine their private retirement savings into one pool, “to help mitigate disadvantage caused by one partner taking time out of the labor market. We suggest that the automatic enrollment review takes this idea into consideration.”

A notice on the website of the Department for Work and Pensions said no further changes to the state pension age will come into effect before 2028, and “the government is committed to maintaining a state pension that is fair for all generations and helps to provide for the cost of living in retirement.”

The report was broadly welcomed by the retirement industry. However, the Pensions and Lifetime Savings Association said it was concerned by the proposal to accelerate the increase in the state pension age to 68. “This proposal will hit people in their late 30s and early 40s — the very group who are too young to have benefited from final salary pensions and too old to benefit in full from automatic enrollment,” said Graham Vidler, director of external affairs at the PLSA, in a news release. “The government (needs) to fully consider the consequences of this early rise for those who cannot stay in work until their late 60s.”

The full report is available on the government’s website.